Overview
Neoliberalism is a term for a set of ideas and policies that became influential from the late 1970s onwards, emphasising markets, competition, free trade, privatisation, deregulation, low inflation and fiscal discipline. It is closely related to classical liberalism but differs in an important way: it is not primarily about shrinking the state to a minimum, but about using state power to create, extend and protect markets, including through independent central banks, trade agreements and competition law.
The word is contested. Few politicians call themselves neoliberal; it is used mainly by critics, scholars and, more recently, by a small number of supporters who have reclaimed it. Because it is often used loosely as an insult, we try here to describe the core ideas and policies precisely, along with both the arguments for them and the criticisms.
On our test, neoliberalism shows a strong Markets score, a strong Global score, a Reform orientation and a moderate lean towards Growth. Unlike libertarianism, it is close to neutral on the authority axis, reflecting acceptance of a capable state that enforces market rules.
Core beliefs
- Markets as the best coordinators. Competitive markets allocate resources more efficiently than governments and reward innovation.
- Free trade and capital mobility. Lowering barriers to trade and investment increases prosperity globally.
- Sound money. Price stability should be the priority of monetary policy, ideally run by independent central banks.
- Fiscal discipline. Governments should avoid persistent large deficits.
- Privatisation and deregulation. State-owned enterprises and heavily regulated sectors often perform better under private ownership and competition.
- Market-like reforms in the public sector. Choice, competition and performance targets can improve public services.
- Individual responsibility. Welfare should encourage work and self-reliance.
History
The term "neoliberalism" was first used in the 1930s, notably at the Walter Lippmann Colloquium in Paris in 1938, where economists and intellectuals sought to renew liberalism after the Great Depression. They rejected both laissez-faire and central planning, and looked for a liberalism with a strong legal framework. This group included Friedrich Hayek, Ludwig von Mises, Wilhelm Röpke and Alexander Rüstow. After the war, the Mont Pelerin Society (1947) became a forum for these ideas, and the Chicago School of economics, especially Milton Friedman, developed the monetarist and pro-market arguments that later became influential.
In the post-war decades, Keynesian demand management dominated Western economic policy. The stagflation of the 1970s, a combination of high inflation and high unemployment, weakened confidence in that approach. In Chile, after the 1973 coup, economists trained in Chicago carried out market reforms under the Pinochet dictatorship, a fact critics often emphasise. In the UK, Margaret Thatcher's governments from 1979 privatised state industries, curbed union power and pursued monetarist policies. In the US, Ronald Reagan's administrations cut taxes and deregulated. Under Paul Volcker, the Federal Reserve raised interest rates sharply to bring down inflation.
In the 1990s, many centre-left governments accepted core elements of the market agenda. The economist John Williamson coined the term "Washington Consensus" in 1989 for a list of reforms recommended to developing countries by Washington-based institutions, including fiscal discipline, trade liberalisation and privatisation. The collapse of the Soviet bloc was followed by rapid market transitions in Eastern Europe, sometimes called "shock therapy". The World Trade Organization was created in 1995. China's market reforms and its entry into the WTO in 2001 reshaped global trade.
The 2008 global financial crisis led to widespread criticism of financial deregulation. In the following years, populist and nationalist movements on both left and right challenged free trade and globalisation, while industrial policy returned in many countries. Defenders argue that the period of market reforms coincided with a historic fall in global extreme poverty; critics argue that it widened inequality within many rich countries.
Key thinkers and texts
- Friedrich Hayek: The Road to Serfdom, The Constitution of Liberty.
- Milton Friedman: Capitalism and Freedom, Free to Choose (with Rose Friedman).
- Ludwig von Mises: Human Action (though Mises's views were closer to strict laissez-faire).
- Wilhelm Röpke: A Humane Economy.
- James Buchanan: public choice theory.
- Critical histories: David Harvey's A Brief History of Neoliberalism, Quinn Slobodian's Globalists, Philip Mirowski and Dieter Plehwe's The Road from Mont Pèlerin.
Variants and related ideologies
Ordoliberalism, from the German Freiburg School, shaped West Germany's "social market economy" and stresses a legal order that ensures competition. Chicago School economics emphasises monetarism and market efficiency. Third Way politics combined neoliberal economics with social investment. Classical liberalism is the older parent tradition. Libertarianism shares market enthusiasm but wants a much smaller state. Market liberalism and economic liberalism are often used as neutral synonyms.
Where it sits on our eight axes
On Global vs Nation, neoliberalism is one of the most globally oriented traditions on our list, supporting open trade, capital flows and international economic institutions. On Progress vs Tradition, it is relatively neutral: it has been combined with both social conservatism (as with Thatcher and Reagan) and social liberalism (as with many 1990s centre-left governments). On Ecology vs Growth, it leans towards Growth, preferring market tools like emissions trading to direct regulation. On Local vs Central, it is roughly neutral, sometimes favouring decentralisation of public services and sometimes centralising monetary and trade powers. Secular scores are moderate.
Is "neoliberal" a useful label?
Scholars disagree about whether "neoliberalism" names a coherent ideology. Some historians, such as Slobodian, argue that it was a deliberate intellectual project to protect markets from democratic interference through international institutions. Others argue that the term lumps together very different policies, from Chilean privatisation to Nordic school-choice reforms, and has become a catch-all for things critics dislike. Some economists who supported liberalising reforms reject the label, describing themselves simply as mainstream or market-oriented. Because of this, our test describes the position in terms of its policy commitments, and the page keyword "market liberalism" is used as an alternative.
How it answers the big questions
- What should the state do? Enforce property rights and contracts, maintain competition, keep money stable, and provide targeted support.
- What about public services? Introduce choice and competition where possible.
- What about unions? Generally favours flexible labour markets and is wary of strong union power.
- What about globalisation? Broadly beneficial, with adjustment support for those who lose out.
In practice today
After 2008, and particularly after the COVID-19 pandemic, many governments moved away from strict fiscal and market orthodoxy, with large stimulus programmes, renewed industrial policy and new trade restrictions. Even so, central-bank independence, inflation targeting, global supply chains and market-based public-sector management remain widespread. Debates continue over whether these institutions should be kept, reformed or replaced.
Criticisms and debates
Critics argue that neoliberal policies increased inequality within countries, weakened unions, contributed to financial instability (including the 2008 crisis), and placed economic decisions beyond democratic control. Some argue that privatisation of utilities and public services led to higher prices or poorer service in particular cases. Economists such as Joseph Stiglitz have criticised Washington Consensus policies in developing countries, especially rapid capital-account liberalisation. Nationalists argue that free trade hollowed out manufacturing communities. Defenders reply that market reforms reduced inflation, increased growth, lowered consumer prices, and that global trade contributed to the dramatic fall in world poverty since 1990, as documented in World Bank data. They also argue that many problems blamed on neoliberalism had other causes.
Key dates
- 1938: Walter Lippmann Colloquium in Paris.
- 1947: Mont Pelerin Society founded.
- 1979: Thatcher elected; Volcker becomes Fed chair.
- 1989: Williamson coins "Washington Consensus".
- 1995: World Trade Organization established.
- 2008: Global financial crisis.
Common misconceptions
- "Neoliberals want no state." They want a strong but limited state that sets and enforces market rules.
- "Neoliberalism and conservatism are the same." They overlap in some parties but differ on tradition, nationhood and social policy.
- "Neoliberal is a neutral term." It is mostly used by critics, which is why definitions vary.
If your answers point here
You may match this tradition if you favour markets, competition and free trade, want stable money and disciplined budgets, see globalisation as broadly positive, and are relatively pragmatic about social issues. Strong Markets and Global scores with a mid-range authority score are the hallmark.
A suggested reading path
Read Friedman's Capitalism and Freedom for the case in favour and Harvey's A Brief History of Neoliberalism for a critical account. Slobodian's Globalists is a detailed intellectual history. Williamson's own later essays on what he meant by the "Washington Consensus" are illuminating, and Stiglitz's Globalization and Its Discontents gives an insider's critique.
Frequently asked questions
Is neoliberalism left or right? Economically right of centre; it has been implemented by governments of both centre-left and centre-right.
Is neoliberalism the same as capitalism? No. It is one approach to managing a capitalist economy among several, such as Keynesian or social-democratic approaches.
Why do people use the word as an insult? Because it is associated, rightly or wrongly, with inequality, austerity and financial crises.